India Squeezes Its Oil Companies To Meet Fiscal Deficit Target


NEW DELHI, Nov 8 (Reuters) - India's state-run oil companies are feeling the pain of the finance minister's determination to meet his fiscal deficit target, with officials warning that exploration is under threat and losses at oil firms could steepen.

Oil Minister M. Veerappa Moily warned the finance minister, P. Chidambaram, that the subsidy burden placed on upstream companies was making oil fields unviable.

His ministry also forecast that revenue losses further downstream at fuel retailers Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum will rise to 803.16 billion rupees ($12.83 billion) in October-March, from 623.32 billion rupees ($9.96 billion) in April-September.

India budgeted fuel subsidies for the fiscal year to March 2014 at 650 billion rupees. The oil ministry said that is likely to be more like 1.4 trillion rupees.

The warning and figures were in oil ministry letters seen by Reuters. The oil and finance ministries declined to comment.

Chidambaram says the budget deficit target of 4.8 percent of GDP is a "red line" that will not be crossed as he tries to fend off a threatened downgrade of India's sovereign credit rating to "junk." The soaring fuel subsidy bill has put the target in jeopardy.

The finance and oil ministries want to raise the price of subsidised fuel, such as diesel, to reduce pressure on government spending.


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